Home builders feel more confident, despite inflation and higher interest rates
Home builders feel more confident, despite inflation and higher interest rates
Later this morning we’ll learn how much new home construction got underway in March. Housing starts and permits have been falling since interest rates started soaring last year. (Though activity bumped up in February thanks to unseasonably warm weather.)
Meanwhile, yesterday we got a confidence check on the home-building industry.
As mortgage rates climbed to nearly 7% last year and home sales fell, the National Association of Home Builders’ confidence index tanked.
But since the beginning of this year, it’s been rising, says chief economist Robert Dietz. “The turning point is in view,” said Dietz.
Dietz expects mortgage rates to stabilize around 6%, attracting buyers back into the market.
But probably not first time buyers with limited budgets. He says construction inflation has driven prices way up, so most new homes are only affordable for: “Older, wealthier, higher-income buyers.”
Meanwhile, current homeowners want to hold onto their low mortgage rates, so they aren’t putting their homes on the market. Zillow economist Jeff Tucker says that translates to: “Fewer commissions, less transactions, less income, and in the longer run, probably fewer jobs.”
Real estate employment fell in March. That could be a statistical blip or the start of a sustained decline.
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